Online Grocery Shopping a Tough Sell Despite All the Buzz

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Inside a Publix Grocery Store As Company Sales Increase
Luke Sharrett/Bloomberg via Getty ImagesA customer pays for her purchases at a Publix Super Markets grocery store in Knoxville, Tennessee, in March.
By Krystina Gustafson | @KrystinaGustafs

Online shopping has encroached on bricks-and-mortar stores in nearly every aspect. But for one type of retailer, the physical store has so far emerged relatively unscathed.

Although major companies such as Amazon.com (AMZN) and Walmart (WMT) are experimenting with online grocery ordering and delivery, a new study from PwC found that only 1 percent of consumers said online shopping is their primary way to purchase groceries. That's despite the fact that the vast majority of the 1,000-plus respondents have access to the option.

The findings make the segment an outlier in a web-centric consumer base, which is expected to drive online retail sales to $294 billion in 2014 and account for 9 percent of all U.S. sales, according to Forrester Research.

"Although online retail shopping is on the rise, it's not yet the go-to for grocery shoppers, now or in the near future," PwC said in the report, released Tuesday. "There's still a major obstacle to overcome: Touching the product isn't possible online."

While this drawback to web shopping extends beyond grocery, it's been particularly troublesome for a category in which consumers like to closely examine items such as fresh produce. According to Forrester, grocery accounts for only a minuscule 2.2 percent of online sales.

But consumers' preference for traditional grocery experiences isn't limited to online. According to PwC's report, 83 percent of shoppers prefer to buy groceries at traditional grocery stores.

%VIRTUAL-article-sponsoredlinks%That's despite increasing pressure from Walmart, which announced earlier this year that it's expanding its organic food offerings, and is testing grocery delivery in San Jose, California, and Denver, Colorado.

The Denver market also allows shoppers to order their groceries online and pick up their orders in-store, without leaving their vehicles. Although Walmart doesn't break out the sales for this program, spokesman Ravi Jariwala said more than 80 percent of shoppers in Denver who have used the service are repeat customers.

"More and more customers are beginning to choose pickup," Jariwala said. "We're trying to provide customers more choice."

Target is also putting pressure on the sector, saying in its most recent earnings call that it too will make certain non-perishable groceries available for in-store pickup. Walmart's grocery segment made up 56 percent of its domestic sales last year, while food and pet supplies accounted for 21 percent of Target's U.S. sales.

Despite a slew of new competitors and costs associated with food inflation, a recent report from IBISWorld found that grocery store sales are expected to rise about 1 percent to $574.1 billion in 2014.

Part of the segment's anticipated growth can be attributed to a rebounding consumer, who is more willing to spend more on pricier foods than during the recession, and an influx of shoppers who live in urban areas and prefer smaller, more frequent trips, IBISWorld said. The latter makes them more likely to skip out on wholesale clubs and supercenters.

Still, that's not to say shoppers are completely satisfied with their grocery store visits. PwC's report found customers' top complaints include long lines, crowded stores and unhelpful workers. They also want more from their grocer's coupons and rewards programs, including custom coupons catered to their previous purchases and rewards for purchasing healthy foods.

And while they haven't yet taken to online ordering, consumers still want there to be a high-tech component to their grocery visits. These include in-store kiosks or robust mobile apps, which could include recipes or nutritional facts. FreshDirect, for example, which delivers groceries in the New York City and Philadelphia areas, allows customers to create shopping lists to expedite the online shopping process.

"While online channels may not become a common way to buy groceries in the near future, technology will still play a major role in the evolving grocery experience," said Sabina Saksena, managing director in PwC's U.S. retail and consumer practice. "Grocers that innovate and build on their digital channels to meet this demand will be most successful."

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Online Grocery Shopping a Tough Sell Despite All the Buzz
This may seem distasteful, as many Americans believe it unsafe to eat marked-down meat close to its sell-by date. The truth is, supermarket chains mark down meat up to 75 percent several days before the sell-by date. If you're prepared to cook (or freeze) the meat as soon as you get it home, there should be no problem. Naturally, look at it and smell it when you get home. If you have any doubt, toss it. And don't buy meat after the sell-by date. I have been buying meat this way for several years with nary a problem. Two good websites can help quell your unease about this: stilltasty.com (which also has an iPhone app) and eatbydate.com.
 Before Thanksgiving is the best time to pick up frozen turkeys. I always buy two, one for Thanksgiving and one for Christmas. Just before St. Patrick's Day is often the best time to buy corned beef, and hams are rarely cheaper than before Easter.
As well you know, after a holiday, stores mark down the Easter candy, the Christmas gifts and the Passover and Hanukkah fixings. These are great opportunities to pick up foodstuffs that usually only grace holiday tables, to enjoy at other times.
Often, stores anticipate greater demand for ethnic foodstuffs than their patrons deliver. Take advantage of your neighbors unadventurous palates by exploring the world of flavors available at the local grocery store. Alternatively, if you are lucky enough to have an ethnic grocery store near you, many unusual foods will be substantially cheaper than at chain supermarkets. I love to go to ethnic grocers; not only do they offer samples of unfamiliar foods, but people are generally willing to explain what to do with these new (to me and you) items. Also, seafood can be considerably cheaper. Last weekend, live Maryland blue crabs were $3.99 a pound -- that's cheap even in Maryland. And you can buy fish heads and other cuts of fish to flavor stocks and chowders.
Most stores with bakeries bake more than customers will buy. One store near me always has a section of not-as-fresh breads and sweet items 50 percent off. At these prices, those are often more cost-effective than homemade.
At the back of the store, groceries hide shelves of dented or unlabeled cans and smushed boxes -- but there's nothing wrong with the contents. A few months ago, I bought a case of pasta at 11 cents a box. In some towns, small stores buy the dented and older inventory of the chains. The main caveat for dented cans is never buy a can that is bulging or that is punctured or pierced; both can signal dangers such as botulism.

Free, of course, is the ultimate savings option. Some rare stores will give you an item for free if it rings up on the register at a different price that that listed on the shelf. Just a few weeks ago, I found frozen stuffed cabbage, originally $18 for $3.99. However, it still rang up at the higher price. The clerk checked, found I was right, and it was taken off my bill for the inconvenience. This doesn't happen often, but it pays to keep a rough idea of what prices items are marked at so you can dispute the register if a price comes up wrong.

Store usually just want to get rid of these unpopular items, and they may never been seen again. Sometimes, they are products discontinued by the manufacturer. They seem to be more frequent in the frozen food aisle, in my experience.
Milk or butter are rarely marked down, but sometimes stores have gourmet cheeses at half-price. With good cheeses often going for more per pound than high-end cuts of beef, this is a fine thing for cheese lovers.
With prices for some produce also running as high per pound as meat, it's good to know that some stores mark down their uglier, older fruits and vegetables. While those may not be pretty enough for a star turn at the table when you're entertaining guests, they're more than good enough for supporting roles in stews, sauces, soups, compotes and cobblers. You can also be bold and ask -- in a nice way -- what happens with this unlovely produce and see what that gets you.
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